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11 February 2018

A Glimpse Below the Waterline in Patent Enforcement Activity

A recent working paper, The Patent Enforcement Iceberg, illustrates nicely the strengths and limitations of survey work designed to "see" the legally "unseen." In it, Mark Lemley (Stanford) et al., begin by observing that while knowing "quite a bit about patent litigation,” what is comparably far less understood is the degree of patent assertions that take place “outside of [formal] litigation.” This scholarly impulse, addressing a common problem in empirical legal studies, seeks to gain an empirical foothold into legal activity that takes place outside of formal legal institutions. From methodological and research design standpoints, it is difficult overestimate the degree of difficulty incident to efforts seeking to explore legal activity that takes place "in the shadow of law."

The challenge in the patent enforcement area is particularly acute. As the authors note, "[t]he problem is that licensing negotiations and license deals that don’t result in litigation are almost invariably kept secret. The result is that patent litigation is like the proverbial tip of the iceberg – the observable piece sticking out of the water, but probably not all or even most of what there is. Various people have speculated that unlitigated (and therefore unobserved) assertions are a majority and probably as much as 90% of all patent enforcement. That is a real problem for those who make patent policy and for scholars and businesspeople who want to assess the true cost of patent enforcement.”

Exploiting an intentionally simple survey instrument, the authors find that "while patent litigation does not reflect everything that is going on, there was less unlitigated – and therefore unseen – patent enforcement than some of us had thought. Roughly one-third of all patent licensing efforts among our survey respondents end in litigation, significantly less than the 10% some had predicted. And, for the majority of respondents, about one half of the demands end in litigation. Our results allow us to get a handle on the actual size of the patent enforcement business and to try to estimate the total cost of responding to enforcement efforts.”

To be sure, such exploratory work, while important, is limited in critical ways. This paper analyzes patent assertions in a single year (2015) derived from a "convenience" sample of 68 companies with in-house counsel and active in the information technology field. The sample yielded only a 44.1% response rate. Thus, threats from selection bias, as the authors note, lurk ("Different companies – samples from different places – might well tell a somewhat different story"). To this end, the paper expressly promises that more expansive work is forthcoming.